First of all, I am sure there is a SMALL amount of validity to their point. However, their example is total horse hocky! I could not get a job without my degree. While their “average” high school grade without college earning figures are probably pretty close my experience shows that their “with a degree” earnings are already wrong.
Let me break down their example:
Consider two childhood friends, Ernie and Bill. Hard workers with helpful families, each saves exactly $16,594 for college. Ernie doesn’t get accepted to a school he likes. Instead, he starts work at 18 and invests his college savings in a mutual fund that tracks the broad stock market.
Throughout his life, he makes average yearly pay for a high school graduate with no college, starting at $15,901 after taxes and peaking at $32,538. Each month, he adds to his stock fund 5% of his after-tax income, close to the nation’s current savings rate. It returns 8% a year, typical for stock investors.
This assumes a lot. It assumes that Ernie actually invests in decent stocks and continually invests (which honestly making $15k a year is pretty much impossible to live on as a single person, let alone save). I would say that especially today, if he is working (and that is actually a consideration!) he will be living pay check to pay check and not saving 5% if anything.
Bill has a typical college experience. He gets into a public college and after two years transfers to a private one. He spends $49,286 on tuition and required fees, the average for such a track. I’m not counting room and board, since Bill must pay for his keep whether he goes to college or not. Bill gets average-size grants, adjusted for average probabilities of receiving them, and so pays $34,044 for college.
Who says he has to transfer? I found a great program locally. I was able to live at home with my Mom and commute to school daily. I also received a scholarship for full tuition. I paid virtually nothing for my college education. While I understand this isn’t the typical case for most people, it is a way more possible than one might think. I mailed my scholarship application the day it was to be received by their office. I was late getting my application in. Extremely late.
He leaves school with an average-size student loan and a good interest rate: $17,450 at 5%. The $16,594 he has saved for college, you see, is precisely enough to pay what his loans don’t cover.
This is probably an ideal case, but I left school with approximately $10k in student loans (between Federal loans and borrowing money from my Dad). Interest rate is similar.
Bill will have higher pay than Ernie his whole life, starting at $23,505 after taxes and peaking at $56,808. Like Ernie, he sets aside 5%. At that rate, it will take him 12 years to pay off his loan. Debt-free at 34, he starts adding to the same index fund as Ernie, making bigger monthly contributions with his higher pay. But when the two reunite at 65 for a retirement party, Ernie will have grown his savings to nearly $1.3 million. Bill will have less than a third of that.
Here is my real beef with the whole thing. Any job I could have gotten without my degree would have grossed close to $20k per year or there abouts (~ $10-15 per hour) in a “similar” tech field. I had also worked for 5 years in fast food and was a manager and as a requirement you had to be State certified in food safety. I could have worked in any number of Restaruants or kitchens and made similar money. With my degree (which has cost me no more than $15k do to smart “degree” shopping etc) I started making (benefits included) over $60k. This is already more than example Bill’s “peak” earnings. So lets assume that Ernie makes my “no degree” income and Bill makes my “degree” income.
You have to make a ton of assumptions here and I could go on and on about if Bill did this and Ernie did that. Taking out approximately 30% for taxes. Ernie brings home ~$1500 and Bill ~$3500. See the difference? I would hope it would be painfully obvious how much that degree is worth. Even a head start in savings for Ernie (which is doubtful anyway) I doubt that Ernie would be ahead.
If we assume they live in similar dwellings and spend similarly Bill has an extra $2000 in his pocket. Student loans are paid off by the end of the year and he can easily put the same that Ernie does into savings + anything from the $2000 that is left over.
Yeah, you don’t get that degree. That means there will be more higher paying jobs available for those of us with degress.
It really does amaze me. I mean I don’t see how anybody could say that the college degree is worthless. Especially because it depends so heavily on saving and I don’t think somebody making that little money can really hope to save a whole lot.
It is a big gamble with so-so pay offs. Doesn’t seem worth it to me.
(Happened upon your site from the c6c forums, which I haven’t been to in forever)
I think a very important aspect of a college education was completely left out of this: the EDUCATION part. Regardless of how much money you can make at a 9-5 (which is considerably higher, obviously) after graduation, you walk away from that college with more knowledge than you could possibly have expected to gain otherwise.
It amazes me how ignorant people are.
No kidding. That article just doesn’t make any sense for 95-99% of the world. I mean there is no reason people have to leave college with lots of debt. There are grants, and scholarships, etc. The problem is people don’t think about what they want to do before they get to school and take 2 years to figure it out.
My “debt” from school was less than $17k and most of what I borrowed didn’t have anything to do with pay for school itself but paying my bills and such. It really isn’t that hard if you think for a little bit before you jump into school.
The other thing they leave out is that potential for advancement for those that don’t have a degree don’t usually get. There are those that don’t have much if any post-secondary education that do very well, but it is definitely the exception to the rule. The biggest thing the degree gives you is proof that you can learn and that is the important part.
I was talking to my supervisor, at the place where I’m interning (large utilities company), and he started talking to me about the worth of my degree. He says that without a degree, I could never make much more than an intern makes (~30k/yr). The degree makes my starting salary increase greatly (I don’t remember the number, but it’s at *least* 30k), and only go up from there.
Good paying jobs don’t want to hire people without degrees. With a little bit of knowledge, you can get a degree, then go to school while you work, and graduate without debt.
Also, this scenario is very unlikely, because it assumes the non-degree seeking student is smart enough to save AND invest, while the college student is not. This almost NEVER happens. Sure, most college students graduate with a lot of debt, but if you’re smart, you can save while in college, pay of loans in a year or two, and be able to save and invest while debt free, and making double what someone would without a degree.